October 28, 2021

Economic View: ‘Getting to Yes’ Offers Clues to Fiscal Talks

The Warner Brothers 1999 hit comedy “Analyze This” portrays a mob boss (Robert De Niro) and his psychiatrist (Billy Crystal), who share a passion for the recordings of Tony Bennett. With the film almost completed — and with Mr. Bennett already an integral part of the plot — the studio finally got around to approaching the crooner with an offer of $15,000 to sing “I’ve Got the World on a String” in the movie’s closing scene. But as Danny Bennett, the singer’s son and business manager, later explained, the executives made a fatal mistake by not scheduling this conversation sooner: “Hey, they shot the whole film around Tony being the end gag and they’re offering me $15,000?”

Had studio officials made their offer at the outset, they would have had much more leverage. If the Bennetts demanded an unreasonable sum, the filmmakers could have rewritten the script and used some other singer. At the 11th hour, however, Warner Brothers’ best alternative to a negotiated agreement was to spend hundreds of thousands of dollars reshooting the film. In the end, the studio paid Tony Bennett $200,000 for a brief cameo appearance.

A similar logic is shaping the current negotiations between President Obama and Congressional Republicans. The Republicans want to keep everyone’s tax rates the same while raising revenue by closing tax loopholes yet unspecified. The president, for his part, wants to restore the 39.6 percent top tax rate for families earning more than $250,000, while maintaining current rates for everyone else. But with the Bush tax cuts scheduled to expire at year’s end, the Republicans face a hurdle similar to the one that confronted Warner Brothers.

In the earlier instance, both sides knew that failure to reach agreement would be far more costly to Warner Brothers than to Tony Bennett. Here as well, both sides know that failure to reach agreement before January will be much more costly to the Republican negotiators than to the president. That’s because expiration of the Bush tax cuts lets Mr. Obama confront the Republicans with an extremely unpalatable choice.

If the year ends without a deal, tax rates for everyone automatically revert to those in effect when President Bill Clinton left office. Neither side wants that to happen, but if it does, the president has a strong hand to play. On Day 1 of the new Congressional session, he could propose legislation that would restore the Bush tax cuts for families with incomes under $250,000. Republicans could then vote in favor, in which case the president gets exactly what he had hoped for; or they could vote against, in which case they will have blocked a reduction in almost every voter’s tax rates. They may wish that these weren’t the alternatives they face, but both sides know that many Republicans would find the second option politically untenable.

That realization appears to have led some Republicans to resurrect their time-honored claim that because many top earners own small businesses, higher top tax rates would severely compromise job creation. But that argument flies in the face of the basic cost-benefit test that governs rational hiring decisions. As every economics textbook on the subject makes clear, a business will hire additional workers whenever, and only whenever, their contribution to the bottom line promises to exceed their pay. If that criterion is satisfied, hiring makes economic sense, no matter how poor the business owner might be. And if it isn’t, no hiring will occur, even if the owner is a billionaire.

An awareness of the weakness of their negotiating position may also explain recent Republican attempts to portray the impasse in Washington as a fiscal cliff that poses an unthinkable disaster for the nation. But as Jonathan Chait of New York magazine has argued, the fiscal cliff is a bad metaphor for the situation we are facing. Because middle-class tax rates would be unlikely to remain higher for long, they would have little impact on overall spending. And as the president would tell voters, even that limited impact can be avoided by making the middle-class tax cuts retroactive to Jan. 1.

THE same goes for so-called sequestration — the across-the-board spending cuts to defense and other non-entitlement spending that automatically start to occur after Jan. 1 in the absence of a budget deal. As both sides recognize, blanket cuts are a terrible way to reduce government spending. But here, too, getting to year’s end without an agreement would strengthen the president’s hand.

Government programs exist because at least some constituents want them, which makes even wasteful ones extremely difficult to cut. Both parties could curry favor by embracing proposals to restore money for the programs that voters value most, and the president could delay cuts while Congress was debating those proposals.

In short, the nation faces not a fiscal cliff, but rather a gentle fiscal slope.

Getting to January without a deal would cause anxiety that everyone wants to avoid — especially Republicans, since opinion polls suggest that most voters will blame them if negotiations break down. But the president and Republicans would prefer to reach agreement now on whatever they would be willing to agree to after new year.

Let’s hope they move rapidly. Any such agreement, however, will be heavily shaped by knowledge of what would otherwise happen after Jan. 1. As Mr. Fisher and Mr. Ury wrote, Batna is the only standard that can protect negotiators from accepting terms that are too unfavorable and from rejecting terms it would be in their interest to accept.

Some have likened today’s negotiations to a game of chicken, in which the loser is whichever of two cars on a head-on collision course swerves first. But that metaphor isn’t instructive without some additional texture: if Republicans are driving a Chevy Spark, the president is driving a Mack truck.

Robert H. Frank is an economics professor at the Johnson Graduate School of Management at Cornell University.

Article source: http://www.nytimes.com/2012/12/09/business/getting-to-yes-offers-clues-to-fiscal-talks.html?partner=rss&emc=rss

Economix Blog: Weekend Business Podcast: European Debt, a Tax Plan and General Motors

It’s been a difficult three months for the financial markets, and the global economy is weak. Unfortunately, more problems are probably on the way.

A resolution of the Greek financial crisis is not in sight. Approval of new powers for a stopgap bailout fund depends on the approval of all 17 members of the euro zone, and Finland, Germany and Austria all gave a thumbs-up in the last several days, as I write in the Strategies column in Sunday Business. But in a conversation in the new Weekend Business podcast, Floyd Norris says that many other countries still need to vote, and that even if they approve the strengthening of the fund, further remedies for Greece — requiring many further votes — will undoubtedly be required. The global economy, meanwhile, appears to be losing steam.

The United States has not come up with a solution for its fiscal problems yet, and many Republicans in Congress are opposed to raising taxes. In a separate conversation, and in the Economic View column in Sunday Business, Tyler Cowen, the George Mason University economist, says that a tax increase is inevitable sooner or later. If it doesn’t come as part of a “grand bargain” to reduce the deficit, he says, it will be forced on the United States later on — so it’s best to try to come up with a reasonable solution now.

And in his new book, “Once Upon a Car,” Bill Vlasic says G.M.’s plight in 2008 was so serious that it contemplated a merger with its cross-town rival, Ford. That merger didn’t take place, of course, but in a conversation with David Gillen, he says that it was actually proposed in a meeting between the leaders of the two companies. An article adapted from Mr. Vlasic’s book appears on the cover of Sunday Business.

You can find specific segments of the podcast at these junctures: Floyd Norris (30:27); news headlines (18:47); Bill Vlasic on G.M. (14:45); Tyler Cowen (6:50); the week ahead (1:30).

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Article source: http://feeds.nytimes.com/click.phdo?i=430c32c0928baac81e71fef70edf1d50

Economic View: Business Investment as a Key to Recovery

• The economy is in bad shape. Technically, the recession ended in June 2009, and since then the economy has been recovering. But it doesn’t feel that way to many Americans. Things have stopped getting worse, but they have not gotten much better. The recovery has been so meager that unemployment lingers at historically high levels.

• The disappointing news about job creation is closely linked to lackluster growth in G.D.P. Economists call the relationship between growth and unemployment “Okun’s Law,” after Arthur Okun, who studied it in the 1960s. In essence, Okun’s Law says that to reduce the unemployment rate, we need for gross domestic product to grow by more than its long-run average rate of about 3 percent. So far in 2011, the growth rate has been less than 1 percent.

• The most volatile component of G.D.P. over the business cycle is spending on investment goods. This spending category includes equipment, software, inventory accumulation, and residential and nonresidential construction. And the recent economic downturn offers this case in point about the problem: From the economy’s peak in the fourth quarter of 2007 to the recession’s official end, G.D.P. fell by only 5.1 percent, while investment spending fell by a whopping 34 percent.

• The subpar recovery has coincided with a historically weak investment recovery. Compare our recent experience with that of the early 1980s, when the nation last experienced a deep economic downturn in which unemployment topped 10 percent. That recession ended in the fourth quarter of 1982. In the subsequent two years, investment spending grew by a total of 54 percent. By contrast, in the first two years of this recovery, it grew by half that amount.

• While the sluggish housing market can explain the slow pace of residential investment, it is not the whole story. Business investment has also been weak. Over the last two years, nonresidential fixed investment has grown by only 12 percent, whereas during the two years after the 1982 recession, it grew by 27 percent. Similarly, the narrow category of spending on business equipment and software fell more than twice as much in this recession as it did in the 1982 recession, and it has been slower to recover.

So much for what we know for sure. Now comes the hard part: what to make of these facts.

Advocates of traditional fiscal stimulus often view low levels of investment as a symptom, rather than a cause, of the weak recovery. Businesses are reluctant to invest, they argue, because they lack customers eager to spend. If the government can goose demand by handing out dollars to households short on cash, or by buying goods and services directly, businesses will respond by expanding their own spending as well.

Yet fluctuations in investment spending, rather than being only a passive response, are also one of the driving forces of the booms and busts of the business cycle. The great economist John Maynard Keynes suggested that investment spending is in part determined by the “animal spirits” of investors, which he described as “a spontaneous urge to action rather than inaction.” Recessions occur when optimism turns to pessimism, and businesses are reluctant to place bets on a prosperous future. Recovery occurs when investor confidence returns.

To be sure, both points of view may well be true. The relationship between investment and the overall economy is what an engineer would call a positive feedback loop. Greater business investment would increase hiring, both by those who produce the investment goods and those who buy them. Greater employment would mean more workers taking home paychecks, which in turn would increase the overall demand for goods and services. When businesses saw more customers coming through their doors, they would then increase investment spending yet again.

WHAT can policy makers do to stoke animal spirits and encourage businesses to invest?

One obvious step would be a cut in the taxation of income from corporate capital. According to a 2008 study by the Organization for Economic Cooperation and Development, “Corporate taxes are found to be most harmful for growth.” Tax reform that reduced the burden on capital income and shifted it toward consumption would improve prospects for long-run growth and, in so doing, encourage greater investment today.

Yet it would be overly optimistic to think that any single public policy, by itself, could lead to the kind of robust investment spending seen in previous recoveries. Myriad government actions influence the expected future profitability of capital. These include not only policies concerning taxation but also those concerning trade and regulation.

For example, passing the free trade agreement with South Korea, which has languished in Congress more than four years after first being negotiated, would be a step in the right direction. So would reining in the National Labor Relations Board; its decision to block Boeing from opening a nonunion plant in South Carolina may have been hailed by organized labor, but it surely did not hearten investors.

Economists often rely on the convenient shortcut of separating long-run and short-run issues. Recessions are then viewed as short-run problems that require short-run solutions. That approach, however, may be simplistic. Lack of investment spending is a large part of the economy’s current difficulties, but capital investments are always made with an eye toward the future.

The best fix for our short-run problems may be to focus on policies that will foster long-run growth as well.

N. Gregory Mankiw is a professor of economics at Harvard. He is advising Mitt Romney, the former governor of Massachusetts, in the campaign for the Republican presidential nomination.

Article source: http://feeds.nytimes.com/click.phdo?i=1f58460725faf7b5ef7333003032d001

Economic View: Washington Should Try a Little Prudent Self-Restraint

This may just be a sign of democracy. We elect those who share our frailties. We Americans eat too much, take on too much debt, save too little and put off anything mildly unpleasant as long as possible.

Psychologists and behavioral economists have studied these kinds of problems for decades. We know, for example, that children have trouble waiting even for a few minutes to get three marshmallows if they can have one now, and they find it particularly hard if they have to look at those luscious treats while waiting.

We also know that people are more willing to exert self-control if they can defer the pain to the future. As Augustine famously prayed: “Lord make me pure, but not yet.” New Year’s resolutions are great examples of the resolve we can easily summon about our future selves, especially when suffering from a hangover.

Of course, experience tells us that resolutions rarely work for long. You may have to arrive early to get a spot in your Zumba fitness class the first week in January, but in a few weeks things will be back to normal at your health club. This is the essence of self-control problems. Our great intentions are fleeting.

Members of Congress realize that their institution has grave self-control problems, and they even agree about the cause: bad decisions made by previous Congresses, especially decisions made when the other party was in control.

Now, with the debt ceiling debate still fresh, it is not surprising that Congress and some voters are interested in making resolutions about the behavior of future Congresses. Unfortunately, there is little that has been done so far, or is under discussion, that should give anyone much hope that Congress’s promises will be any more effective than those we make on New Year’s Day.

Following Augustine’s dictum, Congress has mostly opted for future austerity. The cuts that will be imposed if the Congressional “supercommittee” cannot agree on a plan would not actually begin until 2013, and there is nothing to prevent future Congresses from undoing these plans.

The only reason to expect commitments being made now to have any effect is that they change the status quo: Congress has to act to undo them. But that puts these plans on exactly the same footing as the so-called Bush tax cuts that are scheduled to expire at year-end, 2012. Those cuts will expire unless Congress changes its mind.

Indeed, the celebrating by conservatives regarding their “victory” in the debt ceiling deal is as premature as the teeth-gnashing by progressives. All that has happened is that we have wisely chosen not to voluntarily default on our debts, at least not yet.

So it may be reasonable to ask whether there is something more substantive Congress can do to deal with its budget problems. A solution favored by many Republicans is to pass a constitutional amendment requiring a balanced budget. The plan’s appeal is easy to understand. It promises much-needed discipline, and best of all, it would take many years to approve. Maybe it should be called the Augustine amendment.

But do not be fooled. Even if the amendment could be put in place immediately, it would be a bad idea for two reasons. It wouldn’t work, and we wouldn’t want it to work.

To see why it wouldn’t work, just look at other governments that already have such rules in place. Start with states and municipalities. Even with balanced budget rules, they collectively have debt of about $3 trillion. Most states are sensibly allowed to issue bonds to cover major building projects such as roads and schools, but this can allow debts to mount. Yet these visible obligations are just a part of the problem. Debts of roughly the same magnitude are hidden in the form of underfunded pension liabilities once the official estimates are corrected for some dubious assumptions about risk. No balanced budget rule can prevent abuse via creative accounting.

If you think such rules would work better at the national level, look at Europe. When the European Union was formed, member states were required to limit annual deficits to 3 percent of gross domestic product. We are now seeing the difficulty of enforcing such rules.

More important, even if a balanced budget rule were enforceable, it would be bad policy. Consider the case of household spending. Most of us are faced with a lifetime balanced budget constraint. Unless we manage to die with negative net worth (or declare bankruptcy), the amount we can spend and give away during our lifetimes is limited to what we earn or receive as gifts.

Now, would it be a good idea for a family to adopt a rule that spending cannot exceed earnings in any calendar year? Obviously not. A prudent household should save during good years to allow for spending to exceed income in years with unexpectedly low pay or high expenses like college tuition.

Governments should follow the same policy. In booms we should run surpluses, as we did in the 1990s, a feat achieved with a combination of spending cuts such as welfare overhaul and revenue increases, some a byproduct of a stock market bubble. Those surpluses allowed for greater spending during the recession of 2001. But when that recession ended, the federal government did not begin saving for the next one. Instead Congress cut taxes and increased spending, leaving nothing saved when the 2008 financial crisis hit.

THAT history led to our current mess. With the excess capacity in the construction industry and millions of unemployed workers, we have the unique opportunity to buy roads, bridges and schools “on sale.” Instead of creating jobs now and improving our infrastructure for the rest of the century, Congress is debating futile resolutions about future chastity.

The bottom line is that in matters of governmental self-control there is no real substitute for willpower. If we want to balance the budget over time we are going to have to elect adults to Congress who are prepared to invest now in our country’s future and then, when the economy picks up, take the necessary steps to get spending in line with revenue. The question is whether politicians who act like adults can win elections.

Article source: http://feeds.nytimes.com/click.phdo?i=d6fb2b7b664ee6a3a4dc2f997a19dded

Economic View: What’s With All the Bernanke Bashing?

He left a comfortable professorship at Princeton to run the Federal Reserve — and this is what he gets.

Mr. Bernanke has worked tirelessly to shepherd the economy through the worst financial crisis since the Great Depression, and yet, for all his efforts, seems vastly underappreciated.

CNBC recently asked people, “Do you have confidence in the way Ben Bernanke is handling the economy?” Ninety-five percent of the respondents said no.

Yes, the CNBC survey was hardly scientific. Nonetheless, it reflected the deep unease that many Americans feel about our central bank and its policies. Critics on both the left and right see much to dislike in how Mr. Bernanke and his Fed colleagues have been doing their jobs.

Let’s review the complaints.

Critics on the left look at the depth of the recent recession and the meager economic recovery we are experiencing and argue that the Fed should have done more. They fear that the United States might slip into a long malaise akin to Japan’s lost decade, in which unemployment remains high and the risks of deflation deter people from borrowing, investing and returning the economy to its potential.

Critics on the right, meanwhile, worry that the Fed has increased the nation’s monetary base at a historically unprecedented pace while keeping interest rates near zero — an approach that they say will eventually ignite inflation. Some in this camp have gone so far as to propose repealing the Fed’s dual mandate of simultaneously maintaining price stability — that is, holding inflation at bay — while maximizing sustainable employment. Better, these people say, to replace those twin goals with a single-minded focus on inflation.

Yet Mr. Bernanke’s record shows that the fears of both sides have been exaggerated.

Mr. Bernanke became the Fed chairman in February 2006. Since then, the inflation measure favored by the Fed — the price index for personal consumption, excluding food and energy — has averaged 1.9 percent, annualized. A broader price index that includes food and energy has averaged 2.1 percent.

Either way, the outcome is remarkably close to the Fed’s unofficial inflation target of 2 percent. So, despite the economic turmoil of the last five years, the Fed has kept inflation on track.

Of course, this record could come undone in future years. Yet the signals in the financial markets are reassuring. The interest rate on a 10-year Treasury bond, for instance, is now about 2.8 percent. A 10-year inflation-protected Treasury bond yields about 0.4 percent.

The difference between those yields, the so-called “break-even inflation rate,” is the inflation rate at which the two bonds earn the same return. That figure is now a bit over 2 percent, a sign that the market does not expect inflation in the coming decade to differ much from that experienced over the last five years. Inflation expectations are anchored at close to their target rate.

Could the Fed have done substantially more to avoid the recession and promote recovery? Probably not. The Fed used its main weapon against recession — cuts in short-term interest rates — aggressively as the depth of the downturn became apparent. And it turned to various unconventional weapons as well, including two rounds of quantitative easing — essentially buying bonds — in an attempt to lower long-term interest rates.

A few economists have argued, with some logic, that the employment picture would be brighter if the Fed raised its target for inflation above 2 percent. They say higher expected inflation would lower real interest rates, thus encouraging borrowing. That, in turn, would expand the aggregate demand for goods and services. With more demand for their products, companies would increase hiring.

Even if that were true, a higher inflation target is a political nonstarter. Economists are divided about whether a higher target makes sense, and the public would likely oppose a more rapidly rising cost of living. If Chairman Bernanke ever suggested increasing inflation to, say, 4 percent, he would quickly return to being Professor Bernanke.

What the Fed could do, however, is codify its projected price path of 2 percent. That is, the Fed could announce that, hereafter, it would aim for a price level that rises 2 percent a year. And it would promise to pursue policies to get back to the target price path if shocks to the economy ever pushed the actual price level away from it.

Such an announcement could help mollify critics on both the left and right. If we started to see the Japanese-style deflation that the left fears, the Fed would maintain a loose monetary policy and even allow a bit of extra inflation to make up for past tracking errors. If we faced the high inflation that worries the right, the Fed would be committed to raising interest rates aggressively to bring inflation back on target.

MORE important, an announced target path for inflation would add more certainty to the economy. Americans planning their retirement would have a better sense about the cost of living a decade or two hence. Companies borrowing in the bond market could more accurately pin down the real cost of financing their investment projects.

Mr. Bernanke cannot remove all of the uncertainty that households and businesses face, but he can eliminate one small piece of it. Less uncertainty would, other things being equal, encourage spending and promote more rapid recovery. It might even raise Mr. Bernanke’s approval ratings a bit.

N. Gregory Mankiw is a professor of economics at Harvard. He is advising Mitt Romney, the former governor of Massachusetts, in the campaign for the Republican presidential nomination.

Article source: http://feeds.nytimes.com/click.phdo?i=43be0c53fa728a9b66e51c9db374af37

Economix: Podcast: Signs of Economic Weakness, Groupon’s Rise and Driverless Cars

Drawing an accurate picture of an entity as complex and changeable as the modern economy is no simple matter.

In the United States, it’s fairly clear that the growth rate of the economy slowed in the first quarter of the year. But what is the rate of growth now, and is the economy in danger of slipping further, perhaps even back into a recession, in the months ahead?

There are certainly some danger signs, and in the new Weekend Business podcast, I discuss some of them with David Leonhardt, a Times economics writer and a recent recipient of the Pulitzer Prize for commentary. He says a great deal of evidence suggests that the economy is weakening, yet officials in Washington do not seem to have taken much notice.

Meanwhile, in a separate conversation with Phyllis Korkki, I point out that the bond market does not seem to mind that the United States is bumping up against its debt ceiling. The Treasury Department has taken emergency measures to buy some time, but it estimates that the United States will default on its debt if Congress doesn’t raise the statutory limit by Aug. 2.

Despite this and other problems, the rally in United States Treasuries continues. As I write in the Strategies column in Sunday Business, compared with the rest of the world, the United States appears to many bond investors to be a very stable place to put their money. Whether that will continue, of course, remains to be seen.

The ability of the United States and other societies to innovate rapidly may depend on a rethinking of our attitudes toward technology, according to Tyler Cowen, the George Mason University economist. In a separate conversation in the podcast, drawing on arguments he makes in the Economic View column in Sunday Business, Mr. Cowen cites driverless cars as an example of an innovation for which our legal system is not yet ready.

Countless laws and regulations impede the testing of these vehicles on public roads, making it difficult to assess whether they will be able to speed traffic, cut down on pollution and energy waste, and save lives. Removing barriers to technological development ought to be a public preoccupation, he said, yet there is still relatively little debate about it.

And in another podcast conversation, David Streitfeld tells Phyllis Korkki of the rapid rise of Groupon, the marketing company that distributes discount offers online. Groupon is now estimated to be worth billions of dollars, an assessment that reflects the fascination — some say mania — that many investors have for hot Web companies and social networks. Mr. Streitfeld explains how Groupon works, in an article on the cover of Sunday Business.

You can find specific segments of the podcast at these junctures:

David Leonhardt: 29:40

News: 21:04

David Streitfeld: 18:31

Tyler Cowen: 12:12

Jeff on bonds: 6:05

The Week Ahead: 1:56

As articles discussed in the podcast are published during the weekend, links will be added to this posting.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Article source: http://feeds.nytimes.com/click.phdo?i=7e0dcc834c61d67aa0ec66ff2655ce07

Square Feet : Evan Stein

J.D. Carlisle manages about 600,000 square feet of commercial space and nearly 2,000 apartments citywide. Its developments include Morton Square, the Cielo, Gramercy Green, and the Beatrice.

Q Are you the de facto C.E.O.?

A Yes, absolutely. There’s no C.E.O. The chairman is my partner, Jules Demchick. Our chairman is responsible for assemblage of the property, financing, and usually the initial plan. Once the acquisition is done, he moves on to the marketing and we move to the development. M.D. Carlisle Construction is the vehicle that physically builds the projects. With buildings like the Beatrice you almost need to know the end of the movie before you begin.

Q Will the Beatrice, your newest and biggest project, have a happy ending?

A I hope so. I put my grandmother’s name on the building.

Q Was this your most difficult development?

A It’s by far the most expensive, and this was the most complicated. We have several uses in this building, so that takes a tremendous amount of management to understand how all the pieces work together: how the restaurant is working with our hotel, how the residential building complements the hotel. And we have a garage.

We’re certainly not in the black yet, because the building is in its infancy, but from an economic view we’re pleased with the results.

Q What is the occupancy?

A We are 99 percent. Of 300 rental apartments, we have left four penthouses that we are just allowing for occupancy May 1. All the penthouses start at $20,000, up to $23,500 monthly. We’re already getting a lot of activity on them. And the hotel’s doing well; it’s exceeding our expectations.

Q Why rentals and not condos?

A We cut our teeth on rentals. In the ’60s and the ’70s, we built probably 60- or 70-plus rental projects. The rentals are scattered all over Manhattan. Our recent history was condominiums — we had three or four projects that were a function of the times.

It’s hard to put your heart and soul into something where at the end of the day you don’t have a tangible asset anymore.

Q Would you ever consider converting the Beatrice, if, say the market soared again?

A I hope not. I’d be lying to you if I told you I haven’t been asked that before. We have several rental buildings that have gone through four or five real estate booms, but we like rentals.

Q What’s your assessment of the New York market now?

A In the long-term perspective we’re very bullish, but you’re going to have short-term challenges — whether they be economic, political or availability. There are still tremendous opportunities here, and we’re seeking them out.

Q Do you have any other projects in the works?

A We do have three or four projects that we’re excited about. Unfortunately, we can’t talk about them because we’re under confidentiality agreements.

They’re going to be some rental, some condo; three are ground-up and one is a gut renovation. We’re looking at a couple in the outer boroughs at this point in time, and certainly in Manhattan.

Q So why doesn’t J.D. Carlisle have a Web site?

A We get asked that a lot. We’re low-profile people; we don’t usually have to advertise who we are.

Q You knew at an early age that you wanted to be involved in real estate, didn’t you?

A Yes, because my hero was my grandfather, who founded this business — my maternal grandfather, Beatrice’s husband.

He has been my hero since the minute I could understand who he was, and I would have done anything to be with him — to be him. When I was graduating from college, he asked if I would consider coming to work with him. I jumped at the opportunity and 17, 18 years later, here’s where we are. He’s since retired.

Q What was your first job there?

A I went to school for accounting so I started off computerizing their accounting systems, and I got bored very, very quickly. I made the request for an assistant superintendent’s job. I went to work with a hard hat climbing into the demolition. Just being on a construction site every single day helps me to understand how things wind up working, all the nuances that you need to understand.

Q Do you live in any of your buildings?

A I live in Morton Square. One of the advantages of developing is you get a good price.

Article source: http://feeds.nytimes.com/click.phdo?i=25b460d9e30998e61860fa0d399643f6

Economic View: Show Us the Data. (It’s Ours, After All.)

This statement may seem self-evident, but the revolution in information technology has created a growing list of exceptions. Your grocery store knows what you like to eat and can probably make educated guesses about other foods you might enjoy. Your wireless carrier knows whom you call, and your phone may know where you’ve been. And your search engine can finish many of your thoughts before you are even done typing them.

Companies are accumulating vast amounts of information about your likes and dislikes. But they are doing this not only because you’re interesting. The more they know, the more money they can make.

The collection and dissemination of this information raises a host of privacy issues, of course, and the bipartisan team of Senators John Kerry and John McCain has proposed what it is calling the Commercial Privacy Bill of Rights to deal with many of them. Protecting our privacy is important, but the senators’ approach doesn’t tackle a broader issue: It doesn’t include the right to access data about ourselves. Not only should our data be secure; it should also be available for us to use for our own purposes. After all, it is our data.

Here is a guiding principle: If a business collects data on consumers electronically, it should provide them with a version of that data that is easy to download and export to another Web site. Think of it this way: you have lent the company your data, and you’d like a copy for your own use.

This month in Britain, the government announced an initiative along these lines called “mydata.” (I was an adviser on this project.) Although British law already requires companies to provide consumers with usage information, this program is aimed at providing the data in a computer-friendly way. The government is working with several leading banks, credit card issuers, mobile calling providers and retailers to get things started.

To see how such a policy might improve the way markets work, consider how you might shop for a new cellphone service plan. Two studies have found that consumers could save more than $300 a year by switching to the right plan. But to pick the best plan, you need to be able to estimate how much you use services like texting, social media, music streaming and sending photos.

You may not know how to answer or be able to express it in megabytes, but your service provider can. Although some of this information is available online, it’s generally not readily exportable — you can’t easily cut and paste it into a third-party Web site that compares prices — and it is not put together in a way that makes it easy to calculate which plan is best for you.

Under my proposed rule, your cellphone provider would give you access to a file that includes all the information it has collected on you since you owned the phone, as well as the current fees for each kind of service you use. The data would be in a format that is usable by app designers, so new services could be created to provide practical advice to consumers. (Think Expedia for calling plans.) And this virtuous cycle would create jobs for the people who dream up and run these new Web sites.

Before businesses complain about how hard it would be to comply with such a regulation, they should take a look at the federal government’s Blue Button initiative. This protocol is already providing a secure way for veterans and Medicare beneficiaries to share their medical history with health care providers they trust. (The name “Blue Button” refers to an icon that users click to get the data.)

The Blue Button initiative is already spawning private sector applications. Northrop Grumman has developed a smartphone app giving veterans access to their health records and the ability to receive wellness reminders on their phone. HealthVault, a health care management site from Microsoft, also permits Blue Button users to tap into their medical information service. The ability to access these kinds of services could save lives in emergencies.

If the government can manage to collect and release personal information in a secure and useful way, so can private companies, which will empower consumers to become better shoppers.

Let’s return to the smartphone example. Once a phone owner can provide use data to third-party Web sites, those outfits (BillShrink.com is one) can pinpoint the best pricing plans. Thinking of upgrading your phone? The third-party sites can warn you whether your use is likely to increase, based on the experiences of other consumers who made the same switch.

If personal data is accompanied by detailed pricing information, as I discussed in my last column, consumers will be more aware of how they really use products and how much fees really cost them. And transparent pricing will give honest, high-quality providers a leg up on competitors who rely on obfuscation. All of this will help stimulate the best kind of economic growth.

THE potential applications are endless. Supermarkets, for example, have already learned that they can attract many customers to their shoppers’ clubs by offering discounts to club members. This allows the stores to know what they buy and to target coupons based on their purchases. Shoppers can opt out — but only at the cost of losing the discounts.

So let’s level the playing field. Why not give you, the consumer, something in return for participating? Require that the supermarket make your purchase history available to you. Before you know it, a smart entrepreneur is likely to devise an app that will direct you to cheap and healthy alternatives that can slim your tummy and fatten your wallet. Apps could not only save money; they could also warn shoppers with allergies, for example, that they are buying foods that contain ingredients to which they are sensitive, like nuts or gluten.

The ability of businesses to monitor our behavior is already a fact of life, and it isn’t going away. Of course we must protect our privacy rights. But if we’re smart, we’ll also use the data that is being collected to improve our own lives.

I hope that American companies follow the lead of their British counterparts and cooperate in a “mydata” program. If they don’t, we should require companies to tell you what they already know about you. To paraphrase Moses, let’s ask them to “let my data go.” 

Richard H. Thaler is a professor of economics and behavioral science at the Booth School of Business at the University of Chicago.

Article source: http://feeds.nytimes.com/click.phdo?i=dbe225c22ef76f70f5f909a5c89a77c9

Economic View: Jobless Rate Is Not the New Normal

The turmoil of the last few years, however, has shaken up the economy. Is it possible that it has affected the natural rate of unemployment — increasing it to 8 or even 9 percent? Such a climb would imply that the prospects for a rebound in output and employment have been greatly reduced — and that high unemployment would be our new normal.

This is implicitly the view of some Federal Reserve policy makers, who say that there is nothing more the central bank can do to lower unemployment. And it’s the view of those who say “structural” factors are the main cause of our current high unemployment, which stood at 8.8 percent in March.

Fortunately, there is a more compelling explanation. Strong evidence suggests that the natural rate of unemployment actually hasn’t risen very much. Instead, the elevated unemployment rate appears to reflect mainly cyclical factors, particularly a lingering shortfall in consumer spending and business investment.

Consider the effects of changes in industrial composition. The housing bust and financial crisis led to a decline in construction and finance employment that is likely to be long-lasting. Does that imply a substantial rise in normal unemployment? Almost surely not. Compared with the pre-crisis days, about 1.3 million more construction and finance workers are out of work. Even if they all remained permanently unemployed — which is obviously unrealistic — this change would add less than a percentage point to the normal unemployment rate.

More fundamentally, the economy can usually cope with changes in industrial composition. During normal times, industries decline and grow, and displaced workers move to new sectors. For example, manufacturing jobs declined steadily as a share of total employment in the 1990s, yet the normal unemployment rate remained very low.

The real problem today is that jobs are scarce in just about all sectors. An important study, published in 2010 and recently updated, showed that workers who have lost jobs in construction and finance have been leaving the ranks of the unemployed at almost the same rate as those laid off in less troubled industries. The problem isn’t about particular sectors; it’s about a general lack of hiring.

What about declining geographic mobility? Today, about 11 million families are underwater on their mortgages, which means they owe more than their homes are currently worth. This could make it harder for them to sell their homes and move to jobs in other regions.

But the argument that such “house lock” is a source of high unemployment runs into two empirical walls. First, jobs are not plentiful anywhere. In the most recent data, the unemployment rate in every state was above its level before the recession. So our unemployment problem wouldn’t go away if only people could move more easily.

Second, if house lock were an important factor, we would expect to see greater declines in labor mobility in states with more underwater mortgages, and among homeowners compared with renters. A study scheduled for publication in The Journal of Economic Perspectives finds no support for either of these hypotheses.

Narayana Kocherlakota, the president of the Federal Reserve Bank of Minneapolis, made waves last August when he pointed to a recent climb in posted job vacancies as evidence that current unemployment is mainly structural. Normally, there wouldn’t be this many vacancies until unemployment were closer to normal. Therefore, he argued, a severe mismatch between unemployed workers and the skill requirements or location of available jobs had raised the normal unemployment rate by as much as three percentage points.

But this analysis misses the fact that early in recoveries, vacancies typically rise relative to unemployment. Also, as discussed by Peter A. Diamond in his recent Nobel prize lecture, businesses that are relatively more plentiful today — for example, larger companies and those outside of construction — tend to post their vacancies more consistently. Thus, the changing composition of companies helps explain the unusual rise in vacancies.

When experts weigh the evidence, they come down strongly on the side that normal unemployment has not risen greatly. Once a year, the Survey of Professional Forecasters asks respondents for their estimate of the natural unemployment rate. In the third quarter of 2010, the median estimate was 5.78 percent, almost exactly one percentage point higher than in the third quarter of 2007, just before the recession started. (The highest estimate was 6.8 percent.) And the Congressional Budget Office uses 5.2 percent as its estimate of the natural rate.

All of this suggests that most of our high unemployment is still the consequence of low demand. Consumers remain hesitant to spend because unemployment and debt are high. Companies are unwilling or unable to invest because customers are few and credit is still tight.

This diagnosis suggests that the appropriate remedy is to stimulate demand. In February, I suggested a number of steps the Federal Reserve could take. Some additional fiscal measures would also be useful. More public investment (as the president has advocated), additional aid to state and local governments, and a cut in payroll taxes for employers would all help. Given the severity of the long-run budget problem, short-run fiscal stimulus should only be undertaken as part of a comprehensive package of gradual spending cuts and tax increases. That would give the economy the jolt it needs, while providing reassurance that the United States will remain solvent over the long haul.


REGARDLESS of the cause of extended high unemployment, it is a disaster for families, the economy and government budgets. Thus, if I am wrong, and more unemployment is structural than the current evidence suggests, this is no excuse for washing our hands of the problem. Only the nature of the needed policy response would change. Instead of focusing on increasing demand, we would need policies to help workers and jobs find one another, measures to move workers to where the jobs are (or vice versa), training programs and better education.

And even though today’s unemployment appears mainly cyclical, it could turn structural. The longer that unemployment remains high for cyclical reasons, the more likely that job prospects for unemployed workers will be permanently damaged. In a number of European countries in the 1980s, for example, prolonged recession appears to have caused normal unemployment to rise sharply. Getting cyclical unemployment down quickly is the surest way to prevent that from happening in the United States. 

Christina D. Romer is an economics professor at the University of California, Berkeley, and was the chairwoman of President Obama’s Council of Economic Advisers.

Article source: http://feeds.nytimes.com/click.phdo?i=36f9320c2e12dd0569f33100564ee08a